LISI (EPA:FII) - Q3 Financial information

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25/10/2017 17:45

The sales revenue of the LISI Group rose by 4.9% to EUR1,231 million in the
first nine months of 2017 compared to the previous year

- LISI AEROSPACE  : + 2.7 %
    o First noticeable effects of destocking on the Airbus A350 program
    o Unfavorable effect related to the decline of the dollar
    o Sustained pace of new program ramp-ups in favor of the Structural
      Components activity

- LISI AUTOMOTIVE : + 4.4 %
    o European market well oriented
    o Significant market shares taken in braking components

- LISI MEDICAL : + 26.3 %
    o Organic growth: + 0.4%
    o LISI MEDICAL Remmele undergoes temporary reassignment of parts

Revenue in EURM                            Changes
                     2017   2016   2017/2016  2017 / 2016
                                             on a like for
                                              like basis

Q1                  444.3   388.0   + 14.5 %    + 9.9 %
Q2                  417.4   406.2    + 2.8 %    + 2.5 %
Q3                  369.7   379.9    - 2.7 %    - 1.2 %
Cumulative as of
September 30      1 231.4 1 174.0    + 4.9 %    + 3.7 %

Over the first nine months of the year, the 4.9% increase in consolidated sales
includes the following items:

- a net consolidation scope effect of +EUR12.8 million reflecting the EUR22.8
million contribution to revenue for the period (1.9% of Group revenue) from
LISI MEDICAL Remmele, consolidated since May 2016, and the sale of PRECIMETAL
on February 1, 2017 for a total amount of - EUR10.0 million (0.8% of the
group's total revenue).

- a negative impact of -0.4% related to the translation into euros of the
financial statements of companies in foreign currencies.

At the end of September, organic growth stood at +3.7% and included a slight
decline in the third quarter (-1.2%) from a high base of comparison (+6.9% in
the third quarter of 2016, +6.1% in the first half of 2017). This slowdown can
mainly be explained by the drop, as announced, in Airbus demand (A 350
destocking), the acceleration of the decline of the US dollar against the euro
and the negative effect of the number of working days.

The share of the consolidated revenue generated outside France is 65% of the
total, or EUR797.4 million in total.

Quaterly Consolidated sale

In million euros

2017

444    Q1
417    Q2
370    Q3

2016

388    Q1
406    Q2
380    Q3
397    Q4

EBIT* & Net Profit in EURM

EBIT

131.7**  2014
146.5    2015
157.5    2016

Net profit

81.4     2014
81.8     2015
107.0    2016

* After participation and profit sharing expenses
** IFRIC 21 restated

REVIEW BY DIVISION

LISI AEROSPACE (62% of total consolidated revenue)

- One-time adjustment of Airbus inventory (A350 program)

- Unfavorable effect related to the decline of the dollar

- Continued ramp-up of new programs

Revenue in EURM                            Changes
                    2017   2016    2017/2016   2017 / 2016
                                              on a like for
                                               like basis

Q1                  277.5 248.5    11.7 %        11.7 %
Q2                  258.3 254.2     1.6 %         3.3 %
Q3                  222.6 235.7   - 5.6 %       - 2.9 %
Cumulative as of
September 30        758.4 738.4   + 2.7 %       + 4.1 %

At EUR222.6 M, Q3 2017 revenue was down -5.6% compared to 2016. The "Fasteners"
activity in Europe saw its deliveries fall by -7.6%. As previously announced,
the negative impact of the Airbus destocking on the A350 program materializes
in the third quarter. Indeed, like Boeing with its B787 program in 2016, Airbus
is adjusting its stock level at the edge of the chain after the
industrialization phase (phase in). The acceleration of the depreciation of
the dollar against the euro adds up to that. In the United States, the
"Fastener" business is picking up at Boeing, while the active repositioning of
LISI AEROSPACE with the distribution sector is not yet able to produce
significant volumes of orders and is bearing the brunt of the hardships
experienced by regional aircraft manufacturers. On the other hand, the
"Structural Components" activity recorded new growth of its sales revenue
compared to 2016 with the continued ramp-up of the new programs.
On a like-for-like basis and restated for the impact of foreign currencies,
revenue was down -3.1% in the quarter. Cumulative growth remains satisfactory
at +4.1%.

Comments on performance and outlook

In terms of operations, the structuring projects launched by LISI AEROSPACE,
which was recently awarded the most innovative supplier award by Spirit
AeroSystems, follow the announced roadmap while meeting the service rate
targets on new programs. The "Structural Components" activity is gradually
absorbing the additional costs caused by the technical difficulties and
significant industrialization costs recorded over the last two years, in a
context where the pace of new programs is growing faster than expected...

The production sites of the Fasteners business, which suffer from the adverse
volume effect, temporarily adjust their production levels thanks in particular
to the productivity actions implemented in the context of the LEAP (LISI
Excellence Achievement Program) plan.

More generally, the long-term trends of the aeronautical market remain well
oriented, in particular as regards single-aisle aircraft (A320 Neo, B 737 Max)
and new programs (A350, B787, etc.). In the short term, Boeing's backlog of
orders and Airbus A350 inventory adjustments will be closely monitored.
Improvements in the reduction of industrialization incremental costs and
compliance with delivery programs will remain a focus of the last quarter in
the "Structural Components" segment.

Sales in million euros
End of September

2016      2017

738.4     758.4   AEROSPACE
353.2     368.7   AUTOMOTIVE
82.8     104.6   MEDICAL

LISI AUTOMOTIVE (30% of total consolidated revenue)

- Positive trend of the 1st half confirmed

- Organic growth higher than that of the European market

- Good momentum maintained in the Safety Mechanical Components and Clipped
   Solutions segments

- Closing of the acquisition of Termax scheduled for Q4 2017

Revenue in EURM                              Changes
                         2017   2016  2017/2016  2017 / 2016
                                                on a like for
                                                 like basis

Q1                      128.9  120.9   + 6.6 %     + 6.6 %
Q2                      123.7  122.8   + 0.7 %     + 0.8 %
Q3                      116.2  109.5   + 6.1 %     + 6.2 %
Cumulative as of
September 30            368.7  353.2   + 4.4 %     + 4.5 %

The division posted +6.2% growth for the third quarter compared to last year.
The "Safety Mechanical Components" activity, which fully benefits from new
developments in recent years and significant market share captured in the field
of brake components (Electric Parking Brake), is experiencing the strongest
growth. The "Clipped Solutions" segment also contributed to this satisfactory
performance, while the "Threaded Fasteners" business remained behind.
In the first nine months of the year, sales revenue was up +4.4% compared to
2016 in a European market that gained +3.6%. One should mention in particular
the dynamism of OEMs as well as of German manufacturers.
Order intake for new products in the "Clipped Solutions" and "Safety
Mechanical Components" segment remains dynamic and accounts for over 11% of
sales generated since the beginning of the year.

Comments on performance and outlook

In terms of operations, the recurring smooth operation of the sites of the
"Clipped Solutions" and "Safety Mechanical Components" Business Groups is
supported by the gradual recovery of most of the German sites of the
"Threaded Fasteners" Business Group.

The division's logistics situation remains very good, enabling teams to focus
on streamlining the production organization, implementing the LISI Excellence
Achievement Program (LEAP), and increasing productivity, with the aim of
improving the return on current investments.

The level of order intake remains very high, while the new site in Monterrey
(Mexico) confirms the interest of LISI AUTOMOTIVE customers for location in
that geographic area. The same goes for projects kicked off in China (Shanghai
plant). LISI AUTOMOTIVE is thus strengthening its global position in order to
support its major customers, especially OEMs.

LISI MEDICAL (8% of total consolidated revenue)

- Delayed allocation of certain products without the long-term development
   plan being challenged

- Full year effect of LISI MEDICAL Remmele

Revenue in EURM                               Changes
                       2017   2016    2017/2016   2017 / 2016
                                                 on a like for
                                                  like basis

Q1                     37.9   18.7    + 103.1 %     + 11.5 %
Q2                     35.6   29.4     + 21.2 %      + 3.3 %
Q3                     31.1   34.8     - 10.7 %      - 8.8 %
Cumulative as of
September 30          104.6   82.8     + 26.3 %      + 0.4 %

In line with expectations, since May 9, 2016 the division has benefited from
the consolidation of LISI MEDICAL Remmele (United States), which contributed
EUR47.1 million in revenue over the period.
On a like-for-like basis and at constant exchange rates, the decline in
third-quarter sales is mainly attributable to LISI MEDICAL Remmele, which had
to deal with a temporary delay in the ramp-up of some of its products in the
field of minimally invasive surgery and the reassigning of two significant
products to other production processes. Note the recovery of the 2 smallest
sites in the division (Neyron and Escondido in California).

Comments on performance and outlook

The development of existing products is continuing in a global orthopedic
market with long-term growth of +4% to +5% per year. The momentum (+6%) of the
market for minimally invasive surgery (MIS) is not fading but requires an
adaptation phase before a gradual ramp-up.

PROSPECTS AND COMMENTS ON THE FINANCIAL IMPACT OF THE BUSINESS

All divisions of the LISI Group are operating in markets that are currently
well-oriented in the long term, even though, as announced, some cyclical
adjustments may occur.
This was the case in the third quarter for LISI AEROSPACE, which is facing a
slowdown in specific programs that could extend into the coming months. On the
one hand, the division anticipated production capacity adjustments in the
"Fasteners" business; on the other hand, it will maintain its efforts to
control industrialization costs in the "Structural Components" segment to
support the phase of steady ramp-ups of new programs. The recovery of the
Boeing business in the United States has been confirmed and the time required
to adjust the Airbus inventory will also be a focus of attention.

LISI AUTOMOTIVE confirms the improvement of its performance results and the
good progress of projects abroad. In this respect, the acquisition of TERMAX
(United States), which has just received the approval of the US anti-trust
authorities, is expected to be finalized during the fourth quarter of 2017,
when it will be consolidated by overall integration into the Group's accounts.

The LISI MEDICAL division reinforces its fundamentals and its positioning as a
reference supplier for its customers. The integration of LISI MEDICAL Remmele
opens up new prospects for organic growth once the product portfolio is
stabilized.

For the year 2017, LISI confirms growth in business despite the temporary
slowdown in the LISI AEROSPACE division and a rise in value of its current
operating income.
Free Cash Flow(1) will remain definitely positive despite unfavorable exchange
rates, in line with the Group's business plan.

(1) Free Cash Flow: net operating cash flow minus net CAPEX and changes in
working capital requirements

CONTACTS
Emmanuel VIELLARD
CEO
Mail: emmanuel.viellard@lisi-group.com
Tel. : +33 3 84 57 00 77 - Fax : +33 3 84 57 02 00
Website: www.lisi-group.com

TRADING AGREEMENT: ODDO CORPORATE - Tel. +33 (0)1 40 17 52 89

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LISI (EPA:FII) - Q3 Financial information

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